6. Which of the following statements are correct in relation to M & M Proposition II with no taxes?

I. The required return on assets is equal to the weighted average cost of capital.

II. Financial risk is determined by the debt-equity ratio.

III. Financial risk determines the return on assets.

IV. The cost of equity declines when the amount of leverage used by a firm rises.

A. I and III only

B. II and IV only

C. I and II only

D. III and IV only E. I and IV only